The debt-laden meat processor confirmed today that Shanghai Maling Aquarius Group will invest the money to own 50 percent of a new entity, with the other 50 percent to be owned by Silver Fern's farmers.

Silver Fern chairman Rob Hewett today said the deal would leave it debt free, and give it the financial muscle to speed up its plans to open up the Chinese market, while its farmer-owners would also receive a special dividend of 30 cents a share.

"I can't see anything wrong with this investment. It's the absolute sort of investment that we are looking for in New Zealand."

Speculation about a Chinese stake in Silver Ferns sparked controversy among some farmers worried about losing control, but Mr Hewett said the new entity meant that was not the case.

'A number of benefits'

"In terms of the business itself, as it stands today, nothing changes. From an operational point of view, it's more of the same, but enhanced because we've got the capital behind us to make it work.

"From our shareholders point of view, there's a number of benefits. I think the immediate one they ask is: 'are we going to be a co-operative at the end of this?' and the answer is, absolutely we are, it's a key thing for us.

"The size of the business that the co-operative controls is exactly the same as the size of the business that it controls today, but then Shanghai Maling will add their part to it and together the entity is significantly enhanced."

Mr Hewett will now go on a roadshow to sell the deal to its shareholders.

The deal has been unanimously recommended by the Silver Fern Farms board, and shareholders will vote on it at the AGM on 16 October. It needs 50 percent support to be approved.

There had been widespread speculation about Chinese investment for weeks, but Silver Fern Farms remained tight-lipped until this morning's media conference at the co-operative's head office in Dunedin.

Silver Fern Farms has been in a capital-raising process and was seeking about $100 million in new funding to help reduce debt. It appointed the stockbroking firm Goldman Sachs to help with that process.

Silver Fern Farms has more than 16,000 farmer shareholders, and it owns and operates 19 processing sites nationwide.

It is one of New Zealand's largest employers, with more than 7000 staff in the peak season.

Minister dismisses asset fears

Finance Minister Bill English has dismissed fears the sale will undermine control of New Zealand's primary industries.

Mr English said he was not worried about the new development for Silver Fern Farms, saying it did not undermine New Zealand's control of its own assets.

"We have a lot of productive assets left. By far most of the assets in New Zealand are owned by New Zealanders doing what they do and some of our businesses benefit from investment from overseas, particularly if it gives them distribution channels they otherwise couldn't invest in, or have found pretty difficult to build and maintain."

Meanwhile, the country's other large meat processor, Alliance Group, said it made an unsuccessful offer to invest in Silver Fern Farms as part of a broader industry rationalisation.

In a statement released today, Alliance said it could not go into details for legal reasons but it had been looking at ways the two companies could combine.

Alliance Group chairman Murray Taggart said the company will keep looking for worthwhile proposals or opportunities for industry consolidation, but noted that the Silver Fern Farms/Shangahi Maling deal left Alliance as the only major 100 percent New Zealand farmer-owned red meat processor.

What is the proposed new company structure?

Both companies are setting up a new entity which they will then have a 50/50 share in, and that entity will remain a co-operative.

Silver Fern Farms is not handing over any equity to Shanghai Maling, but rather Shanghai Maling is putting a matching amount of equity into the new company.

The transaction values Silver Fern Farms' equity at $311m. This equates to $2.84 per ordinary share, which compares to the $0.35 share price prior to their suspension in July.

A special dividend of 30 cents per share will be paid to co-operative ordinary and rebate shareholders. Silver Fern Farms said in future it will pay out 50 percent of net profit in dividends to shareholders.

A ten-person board is proposed; five from Silver Fern Farms with three farmer-elected and two independent, while Shanghai Maling will have five directors, with two of them resident in New Zealand.

Who is Shanghai Maling?

The company seeking the stake in Silver Fern farms is one of four main subsidiaries of the Chinese based state-owned multinational food manufacturer Bright Food, known in New Zealand for its 39 percent stake in dairy company Synlait Milk.

Shanghai Maling has extensive interests in chilled and fresh meat, confectionary, and honey, as well as owning about 800 supermarket and retail stores.

In the past three years Bright Food has been on a global buying spree, picking up Australia's grocery importer and distributor Manassen, British cereal maker Weetabix, and Australian dairy company Mundella Foods.

It has also moved to buy into an Israeli food group and an Italian olive oil group.